Westmoreland Announces Agreement to Contribute Kemmerer Mine to Westmoreland Resource Partners, LP
June 02 2015 - 9:03AM
Business Wire
Acquisition Expected to Provide Immediate
Accretion to WMLP Upon Closing
Westmoreland Coal Company (NasdaqGM:WLB, “Westmoreland”) and
Westmoreland Resource Partners, LP (NYSE:WMLP, “WMLP”) announced
today that WMLP has agreed to acquire 100% of the outstanding
equity interests in Westmoreland Kemmerer LLC (“Kemmerer”), which
owns and operates the Kemmerer Mine in Wyoming. Upon closing of the
transaction, Westmoreland will receive $135 million of cash, $20
million of WMLP common units, and $75 million of new WMLP Class A
convertible units.
Since Westmoreland’s acquisition of the Kemmerer Mine from
Chevron in January 2012, management has significantly enhanced
financial and operating performance, exceeding guidance, and signed
a new labor agreement driving operational and productivity
improvements while reducing safety citations and reportable
incidents.
“We are excited to announce the first transaction of our MLP
drop-down strategy,” said Keith E. Alessi, CEO of Westmoreland and
WMLP. “We expect the contribution of Kemmerer to significantly
expand the size of the production base at WMLP, diversify the
customers we serve, and improve the stability of its cash flows
through Kemmerer’s long-term contracts. This transaction
demonstrates Westmoreland’s continued support of WMLP and our
commitment to properly capitalize the partnership and position the
balance sheet to fund future transactions.”
The acquisition, which is expected to close in the third
quarter, is expected to be immediately accretive to distributable
cash flow on a per unit basis to WMLP. Kemmerer will operate as a
wholly-owned subsidiary of WMLP.
When issued, the Series A convertible units will receive
Paid-in-Kind (“PIK”) distributions at a rate that mirrors
distributions to the common units, and are subject to mandatory
conversion into common units on a one-for-one basis upon the
earlier of (i) WMLP paying a quarterly distribution of $0.22/unit
to its common unitholders, a 10% increase to the current
distribution of $0.20/unit, or (ii) 12 months following the close
of the transaction.
The transaction was approved by the Board of Directors of the
general partner of WMLP and by the Conflicts Committee of the Board
of Directors, which consists entirely of independent directors. The
Conflicts Committee engaged Robert W. Baird & Co. to act as its
independent financial advisor and to render a fairness opinion, and
Akin Gump Strauss Hauer & Feld LLP to act as its legal advisor.
BMO Capital Markets and Holland & Hart LLP acted as financial
advisors and legal advisors, respectively, to Westmoreland.
Westmoreland retained Houlihan Lokey to render a fairness
opinion.
The transaction is subject to a financing condition and other
customary closing conditions.
About Westmoreland Coal Company
Westmoreland Coal Company is the oldest independent coal company
in the United States. Westmoreland’s coal operations include
sub-bituminous and lignite surface coal mining in the Western
United States and Canada, an underground bituminous coal mine in
Ohio, a char production facility, and a 50% interest in an
activated carbon plant. Westmoreland also owns the general partner
of and a majority interest in Westmoreland Resource Partners, LP,
formerly Oxford Resource Partners, LP, a publicly-traded coal
master limited partnership. Its power operations include ownership
of the two-unit ROVA coal-fired power plant in North Carolina. For
more information, visit www.westmoreland.com; provided that no
information contained at such website is incorporated by reference
here.
About Westmoreland Resource Partners, LP
Westmoreland LP is a low-cost producer of high-value steam coal
in Northern Appalachia. It markets its coal primarily to large
electric utilities with coal-fired, base-load scrubbed power plants
under long-term coal sales contracts. For more information, visit
www.westmorelandmlp.com; provided that no information contained at
such website is incorporated by reference here.
About Westmoreland Kemmerer LLC
Kemmerer Mine is a 13,400-acre surface mine complex located in
southwest Wyoming. It currently produces coal in three active areas
from 12 primary seams and their splits. Coal from this operation
primarily supplies fuel to PacifiCorp’s adjacent Naughton Power
Station via overland conveyor.
Cautionary Note Regarding Forward-Looking Statements
This release may contain “forward-looking statements.”
Forward-looking statements can be identified by words such as
“anticipates,” “intends,” “plans,” “seeks,” “believes,”
“estimates,” “expects” and similar references to future periods.
These statements involve known and unknown risks, which may cause
our actual results to differ materially from results expressed or
implied by the forward-looking statements. These risks include
factors such as the uncertainty of negotiations to result in an
agreement or a completed transaction, the uncertain nature of the
expected benefits from the actual or expected acquisition, the
uncertain nature of the announced acquisition, the ability to
complete such transactions, risks associated with the our industry
or the economy generally, and other such matters discussed in the
“Risk Factors” section of both Westmoreland’s and WMLP’s 2014
Annual Report on Form 10-K and subsequent quarterly reports filed
on Form 10-Q. Although either or both of Westmoreland and WMLP may
from time to time voluntarily update their prior forward-looking
statements, they disclaim any commitment to do so except as
required by securities laws.
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Investor Contact:Westmoreland Coal CompanyKevin Paprzycki,
855-922-6463